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How construction management can simplify build-outs.

In the New York City office market that we at Hidrock Realty like to call "The Jungle," tenant turnover leads to space renovations. Many landlords consider these build-outs an afterthought compared to getting a lease executed.

The real estate industry contains many specialties like acquisitions, leasing, property management and financing. But another critical segment at Hidrock Realty is construction management. A landlord should not simply hand a build-out to his super or property manager as these jobs require much more follow-up and insight than one would think. The following is an example of the project timeline when handled by a construction management team (CMT).

After a tenant signs a lease, plans must be submitted to general contractors for pricing. Once bids come in, the CMT will confirm that comparisons are done "apples to apples." If the cost of the build-out exceeds the build-out allowance, the tenant may want to modify the plans and have them re-bid. Also, the tenant will often complain about such items as "the showroom is too close to the pantry" or "the office is too small" and require alterations. The CMT takes on the difficult task of coordinating the contractors, tenant, architect and the landlord. Once all parties have signed off on the final set of plans, the CMT must hire an expediter to go for permits. Of course, when dealing with the city, consistent follow-up by the CMT is an absolutely necessity.

So now it's time for your buildout to begin, and without a construction management team, it becomes a full time job for four to eight weeks for your property manager and/or superintendent. Without proper supervision, the first day the contractor starts is probably the most workers you will ever see on the job site. The general contractor locked up your job with your first advance of funds and now pays less attention to your job as he spends time looking for another. Before you know it, the super calls you with a question, "The HVAC guy wants to place his units in the ceiling where the plans call for, but not enough room is given for the drop ceiling to meet specs for the lighting. The general contractor stepped out a couple of hours ago and isn't picking up his cell phone." A CMT knows that the HVAC company is a sub that doesn't get paid for waiting and that they'll walk off the site unless they get an answer in minutes. If they leave, it can be days before they come back and it can throw your entire timeline off. On the fly, adjustments must be considered, approved and implemented.

General contractors must be monitored closely and continuously, since their motivations are different than the landlord's. Sometimes it's hard, but a landlord should not be enticed by the cheapest bid. Background checks are extremely important, as well as assessing the general contractor's current workload. Some contractors accept too much on their plate at once. They don't want to turn down jobs, so they work on those that provide the most profit and neglect others.

For instance, your job can be moving along nicely, so the painters are scheduled to come in and start in three days. However, the next day you show up and no carpenters are working at your site. What do you do? You make some phone calls, but the general contractor is avoiding you. You call his cell phone, you send him a fax, you call his office and the receptionist simply states that he is in a meeting for the morning. Before you know it, the day is lost. He finally calls you to apologize, but blames the subs and says he expects the men to return to the site the next day. The truth is he started another job and had to pull men off your job to get it started. The problem is you need to have the walls painted by the weekend since flooring is starting on Monday.

The financial strength of the general contractor must be considered as well, as subcontractors walk off jobs when they aren't paid in a timely manner. Of course, this lost time is not welcomed by your tenant. A CMT has the resources to get the job done no matter how many games the general contractor plays. If it means paying the subs directly to have them return or going to the supply house directly, the CMT is on top of it and ensures that the tenant will be in on time. Remember, customer service is extremely important as landlords fight to retain tenants.

Proper paperwork and signoffs are necessary with all jobs as the general contractor and the landlord don't want to be liable for any changes that might have been made during the very hectic construction period. Of course, the tenant doesn't want to be hit with a bill at the last second either. All parties have to be kept abreast throughout the project. The new lease seemed to be a blessing just a couple of months ago, but now the landlord can be in danger of missing the deadline by which he must deliver the space. The tenant will complain that "market week" is quickly approaching and start throwing out all kinds of threats. Deadlines are serious to landlords and tenants, but not always to general and sub-contractors. It pays to work with a CMT to reduce your exposure and keep all the parties anxious to do more business together in the future.

Hidrock Realty's construction management team was borne out of necessity as we handled many build-outs in our own buildings over the past few years and our team is now available for landlords throughout New York City.

EDDIE HIDARY

HIDROCK REALTY INC.

CHIEF OPERATING OFFICER
COPYRIGHT 2004 Hagedorn Publication
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Title Annotation:Insiders Outlook
Author:Hidary, Eddie
Publication:Real Estate Weekly
Geographic Code:1USA
Date:Nov 3, 2004
Words:962
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